What Is Slippage in Trading? Simple Explanation and How to Reduce It
Slippage is the difference between the price you expected and the price your trade actually filled at.
Where it comes from
A market order takes the opposite orders from the order book one by one. If there isn't much size at the best price, the rest fills at a worse one. Another cause: the price moved while your order was on its way to the exchange.
Example. You saw a price of $100 and bought at market. The average fill price was $100.40. Slippage is 0.4%.
When slippage is worse
- Low liquidity — a thin order book.
- A large order relative to the size in the order book.
- News releases and sharp moves.
- A stop-loss triggering during a crash.
How to reduce it
- Limit orders fill only at your price or better — see limit vs. market orders.
- Liquid assets and normal trading hours.
- Build in a buffer when calculating risk: a stop may fill slightly worse.
Even with the risk of slippage, you always need a stop-loss — more in take-profit and stop-loss.
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- Slippage is the difference between the expected and actual price.
- It's worst in low liquidity and around news.
- Limit orders reduce it.
Frequently asked questions
Can slippage work in my favor?
Yes, sometimes the fill price is better than expected. But during sharp moves it's more often against you.
What is slippage tolerance on a DEX?
It's the maximum price deviation you allow for a swap. If the price moves further, the swap won't go through.
Should I skip a stop because of slippage?
No. A little slippage is better than an unlimited loss with no stop.
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